This paper develops new indicators of accumulated academic science and tests their explanatory power on productivity data from manufacturing industries. Knowledge is found to be a major contributor to productivity growth. Furthermore, a lag in effect of roughly 20 years is found between the appearance of research in the academic community and its effect on productivity in the form of knowledge absorbed by an industry. Academic technology and academic science filtered through interindustry spillovers exhibit lags of roughly 10 and 30 years each. Thus implied search and gestation times far exceed developmental periods in studies of R & D. A clear implication is that basic research declines relative to development in the face of an exogenous rise in the real of interest.

A version of the overlapping-generations model suggests that an increase in the rate of innovation alters capital formation in favor of schooling and other human capital at the expense of physical capital, and tends to reduce total savings, defined as human investments plus financial savings. The theoretical explanation suggests that relative capital formation in human beings, but not necessarily absolute capital formation, is positively associated with the degree of innovation. Analysis of U.S. time-series data supports the hypotheses advanced in the paper.

This paper develops new indicators of accumulated academic science and tests their explanatory power on productivity data from manufacturing industries. Knowledge is found to be a major contributor to productivity growth. Furthermore, a lag in effect of roughly 20 years is found between the appearance of research in the academic community and its effect on productivity in the form of knowledge absorbed by an industry. Academic technology and academic science filtered through interindustry spillovers exhibit lags of roughly 10 and 30 years each. Thus implied search and gestation times far exceed developmental periods in studies of R & D. A clear implication is that basic research declines relative to development in the face of an exogenous rise in the real of interest.

A version of the overlapping-generations model suggests that an increase in the rate of innovation alters capital formation in favor of schooling and other human capital at the expense of physical capital, and tends to reduce total savings, defined as human investments plus financial savings. The theoretical explanation suggests that relative capital formation in human beings, but not necessarily absolute capital formation, is positively associated with the degree of innovation. Analysis of U.S. time-series data supports the hypotheses advanced in the paper.